Retirement is a new chapter that brings a lot of freedom and, let’s be honest, a bit of uncertainty too. I remember when I first settled into retirement, I found myself wondering, “What now? How do I make the most of this time without it all feeling aimless?” It’s a common feeling—suddenly, there’s all this free time, and you’re not quite sure how to fill it. And let’s not forget about taxes, which seem to follow us even into retirement.
But here’s the good news: there are plenty of ways to stay active, have fun, and even save on your taxes while you’re at it. Imagine combining your hobbies with tax benefits—sounds like a win-win, right? In this blog, I’ll share five enjoyable activities that not only keep you engaged but also offer some sweet tax perks. Let’s dive in and make your retirement both fun and financially smart.
1. Volunteering: Give Back and Get a Little Back on Your Taxes
Volunteering is one of those activities that truly feeds the soul, and it’s becoming increasingly popular among older adults. In fact, while overall volunteerism in the U.S. has dipped, the number of volunteers aged 55 and older is actually on the rise. It’s easy to see why, volunteering can reduce anxiety, fight off depression, and even improve physical health. Plus, it’s a great way to stay connected and feel a sense of purpose.
But did you know that volunteering can also come with some tax perks? While your time spent volunteering isn’t tax-deductible, there are certain out-of-pocket expenses that might be. For instance, if you’re required to buy uniforms or pay for postage as part of your volunteer duties, these costs could potentially be deducted.
Travel expenses, such as lodging or meals when you’re volunteering overnight, may also be deductible. Even the miles you drive for volunteer work could be worth something at tax time—currently, you can deduct 14 cents per mile.
Getting started with volunteer work is easier than ever, thanks to online platforms like VolunteerMatch. You can search for opportunities that fit your interests and schedule, all from the comfort of your home.
Just remember to ensure that the organization you’re volunteering for is tax-exempt, which you can verify through the IRS website or by asking the organisation directly. This is also a smart way to avoid falling victim to fake charities that sometimes prey on retirees.
Volunteering not only enriches your life but can also give your wallet a little boost come tax season—definitely a win-win in my book.
2. Boost Your Retirement Income by Managing a Rental Property—and Enjoy Tax Perks
If living on a fixed income during retirement feels like it’s putting a squeeze on your finances, there’s a way to ease that pressure.
Have you ever considered managing a rental property?
It’s a great way to supplement your income, and thanks to platforms like Vrbo and Airbnb, it’s easier than ever to rent out your space on a short-term basis.
When you manage a rental property, the expenses you incur in the process can lead to some valuable tax deductions. For instance, costs like mortgage interest, property taxes, and even travel to and from your rental property might qualify. You can also deduct the money you spend on cleaning supplies, repairs, and maintenance.
However, be aware that some states, like California, are looking to add extra taxes on short-term rentals, so it’s essential to stay informed. On the bright side, there’s an additional tax benefit—depreciation.
If you meet specific criteria, you can deduct depreciation on your rental property, which can significantly reduce your taxable income.
Plus, there’s a way to earn tax-free rental income, which is definitely worth exploring. Always make sure to research or consult with a trusted tax professional to maximize your savings.
Next up, I’ll show you how your hidden talents can help you stay active in retirement and even trim your tax bill further.
3. Discover New Skills or Hobbies
One of the best parts of retirement is the freedom to dive into new interests or skills you never had time for before. The word “retirement” comes from the French phrase meaning “to withdraw,” but that doesn’t mean you have to withdraw from all the fun and excitement life has to offer.
Many retirees find joy in learning new things or picking up hobbies they’ve always wanted to explore. Not only can this keep you mentally sharp and physically active, but it can also lead to some unexpected tax benefits. For instance, you might qualify for the Lifetime Learning Credit, which is a federal tax break for those who are taking courses to gain new skills or advance their education. To be eligible, you need to be enrolled in courses at an accredited institution and pursue something that improves your job skills or earns a credential.
On the flip side, while picking up a hobby is great for personal fulfilment, it’s important to remember that hobby-related income must be reported on your tax return. If you make under $400 from your hobby, you won’t face self-employment tax. It’s also a chance to test out a potential business idea in a low-risk way.
So, whether you’re exploring a new career path or just enjoying a favourite pastime, keep these tax considerations in mind to make the most of your retirement activities.
4. Launch Your Own Business for Fun and Tax Benefits
Starting a business in retirement might sound like a bold move, but it’s actually quite common. In fact, more than half of all entrepreneurs are over 50, with nearly 23% falling into the 55-64 age range. If you’ve ever dreamed of running your own business, now might be the perfect time to make that dream a reality.
Whether you’re interested in opening a traditional business or starting an online store, there are plenty of opportunities out there. Websites like Etsy, Redbubble, and Storenvy are great places to find inspiration and get started.
Plus, there are some nice tax benefits available for self-employed individuals. The IRS allows you to deduct certain expenses if you make over $400 from your business. This can include deductions for your home office, health insurance premiums, and even Social Security taxes. It’s a great way to stay active, engaged, and save on taxes while enjoying your retirement.
5. Take Control: File Your Own Taxes and Save Money
If you’re looking for a new challenge and have some spare time, why not try filing your own taxes? It might not sound like the most thrilling activity, but it can be a great way to learn more about how your federal income tax return works and save some cash in the process.
On average, people spend around $240 a year on tax preparation services. That’s equivalent to about 69 gallons of gas—enough for a memorable road trip on Route 66! While taxes can be tricky, learning to handle them yourself can be both empowering and cost-effective.
Just remember, if you find the process overwhelming, it’s always a good idea to consult a trusted tax professional for help.
Final Thoughts
Retirement is a perfect time to explore new hobbies and interests while also making the most of potential tax benefits. Whether you’re volunteering, managing a rental property, learning new skills, starting a business, or even tackling your own taxes, there are numerous ways to stay active and financially savvy.
By blending enjoyment with practical tax-saving strategies, you can make the most of your retirement years and keep your finances in check. Embrace these opportunities and turn your free time into a fulfilling and financially rewarding adventure.
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